Commentary: Novartis CEO: Gene therapy offers hope of cures in a treatment, but US needs new pricing, payment model

We live in an incredible era of progress in human health. Advances in cell and gene therapies are beginning to yield powerful new treatments for some of the most devastating illnesses. With many of these new therapies we are no longer combating diseases over time, but potentially curing them in a single treatment.

This is a major breakthrough, but it will introduce new upfront cost challenges to our already stretched health-care system. Policymakers and companies must work together to solve these challenges so that patients can gain access to the tremendous benefit these therapies deliver.

By leveraging a patient’s own biology, cell and gene therapies are already reversing congenital blindness, curing aggressive forms of pediatric leukemia and may soon grant infants with neurological genetic conditions a second chance at life. Researchers are currently developing 300 of these therapies targeting more than 100 serious and often deadly diseases.

By 2025, the FDA expects to approve 10 to 20 new cell and gene therapies each year. I believe these therapies will eventually have the same extraordinary impact on health as other significant advances in medicine, such as improved cancer treatments that have contributed to 25 straight years of declining cancer deaths.

Health-care systems, however, are accustomed to treating chronic diseases with a pay-as-you-go model, spreading costs over months and years. They are currently unprepared to pay for a surge of new, single-treatment therapies with the potential to provide a lifetime of benefit.

This presents two urgent issues for our health-care system. First, we need to develop new models to properly evaluate the tremendous benefit these therapies bring and second, we must develop new approaches for payment when value accumulates over a lifetime.

Over the last decade, policymakers have tried to assess the value of medicine to patients and society, in part, to help figure out how to price and pay for care. Traditional approaches, however, no longer apply when it comes to measuring the full benefits of these new therapies. How can we compare the value of curing an infant from a fatal disease versus treating the child’s symptoms for years before they succumb to the illness?

Clearly, a cure is better for the child, their family, our health system and society, as reflected in a healthy, productive life and the avoided cost and grief of months or years of chronic care. But we need new economic models to determine exactly how much value that represents. I am encouraged that independent health assessment organizations and governments are working with patients, providers and pharmaceutical companies to come up with these new approaches.

If we can agree on the right framework for assessing value, companies can and should price potentially curative cell and gene therapies in a way that allows patients, health-care systems, companies, and broader society to benefit from the human and economic advantages of these innovative new treatments. To ensure uninsured and underinsured patients in the U.S. can benefit from these treatments, companies can help by supporting out-of-pocket costs for specialized care. I firmly believe that systematically implementing all of these measures will ensure access for every patient who can benefit from these life-changing therapies.

Perhaps the most difficult challenge, however, is payment. Fortunately, companies, think tanks and policymakers are already exploring innovative solutions, such as the option to pay in installments over several years and the possibility of refunding payment if the treatment is not successful. For instance, MIT’s New Drug Development Paradigms initiative (NEWDIGS) and the Duke-Margolis Center for Health Policy are both working on innovative solutions for the financing and reimbursement of these therapies.

But these new models are severely restricted by current Medicaid and Medicare payment barriers. The federal government should have the flexibility to encourage these novel and cost-saving approaches. Unless Congress passes new legislation, our health-care system will struggle to evolve from a fee-for-service approach to the value-based payment model necessary to effectively scale up these new therapies and provide patient access to them. Congress should clarify that value-based payment approaches that may help reduce overall health-care costs will not inadvertently trigger government price reporting or anti-kickback provisions.

Cell and gene therapies dramatically expand the options to fight and defeat disease. But preparing our health-care system for the advent of these new therapies will require collaboration among industry, government and other stakeholders to prepare our health-care system. Through a measured and systematic approach to valuation, affordability and payment, we can usher in a transformative new approach to medicine.

Editor’s Note: Novartis CEO Vas Narasimhan, M.D., is speaking along with other top health-care executives Tuesday at CNBC’s Healthy Returns Summit in New York.

For more on investing in health-care innovation, click here to join CNBC at our Healthy Returns Summit in New York City on May 21.